The State Of Industry 4.0 In 2020

Robert Merlo

Part 1 in a series on the findings of an Industry 4.0 adoption study by The MPI Group

It was in 2011 at Hannover Messe that the German government first announced a new initiative to digitize manufacturing – an initiative known as Industry 4.0. Now, less than a decade later, the uptake of Industry 4.0 – not only in Germany and Europe, but around the world – has been impressive.

At the same time, adoption is not necessarily uniform across all companies and industries. What’s clear is that Industry 4.0 capabilities now act as a competitive differentiator that helps set companies apart as the gap widens between the digital haves and have nots. Those moving forward with Industry 4.0 initiatives, in other words, are reaping the benefits of sophisticated new capabilities while the laggards are realizing the need to catch up quickly.

The MPI Group study

This is one of the findings of a recent study by The MPI Group that surveyed 679 manufacturers on Industry 4.0 adoption. MPI defines Industry 4.0 straightforwardly as the practice of organizations “embedding intelligence and/or smart devices into their operations and connecting them to the enterprise and supply chain, as well as offering new products that incorporate embedded intelligence.”

Organizations adopting such practices stand to benefit. The title of the MPI study says it all: Digitization Delivers Operations, Enterprise, and Product Improvements: Manufacturers Leverage Industry 4.0 for Increased Productivity, Revenues, and Profitability.

The importance of Industry 4.0

Overwhelmingly, respondents saw Industry 4.0 as an important initiative – with 90% saying that over the next five years it will have “significant” or “some” impact, and only 9% downplaying the impact.

Perceived value from Industry 4.0 spans three categories: financial, operational, and brand value. Respondents see the most financial value in supply chain activities (50%) while – not surprisingly – operational value is associated with operations (63%), and brand value with sales and marketing (46%).

Processes vs. products

Interestingly, there is somewhat of a split regarding how Industry 4.0 capabilities are applied to processes vs. products (subsequent blogs in this series will focus on each of these categories in more detail).

As a summary of the study states: “Nearly half of manufacturers (47%) have strategies implemented to apply Industry 4.0 to processes, but only 37% have done so for their products.” Organizations seeking to differentiate with Industry 4.0 capabilities, therefore, may find significant opportunities on the product side of the equation.

Transformation leadership roles

Who tends to take responsibility for Industry 4.0 initiatives at the ground level of an organization pursuing transformation? According to the study, respondents say the roles most likely to lead initiatives are the heads of manufacturing (51%), engineering (27%), and the CIO (20%).

When it comes to what these transformation initiatives tend to focus on, there is a fair amount of uniformity. Respondents cite factory automation (62%), AI (62%), and IoT (55%) as top concerns. Typically, the study says, initiatives “start with integration of intelligent sensors and controls into equipment and/or converting source data from analog to digital signals.” The goal, ultimately, is to break down silos across all departments and functions.

At SAP, we have long highlighted this sort of integration as playing a critical role in helping to connect business units across the design-to-operate lifecycle. To get there, however, the study finds that 54% of networks require upgrades to support machine-to-machine communications and 67% require upgrades for machine-to-enterprise communications.

Thus, while many companies see Industry 4.0 trends as having tremendous impacts on the way they operate and compete in today’s increasingly connected economy – and while many are indeed moving forward with initiatives to keep pace – work remains to be done. Organizations with vision and clear leadership will be those that succeed first.

Please stay tuned for subsequent blogs that review aspects of the MPI study as they relate to Industry 4.0 for plants and products. In the meantime, have a look at the full study here.

Robert Merlo

About Robert Merlo

Robert Merlo is Vice President of SAP Solution Marketing, responsible for Strategic Positioning of the Digital Supply Chain and Manufacturing Portfolio of SAP Solutions. Specifically focused on R&D and Manufacturing.